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TABLE OF CONTENTS
I. SUMMARY THE SITUATION.....................................................................2
II. THEORIES RELATED TO THE SITUATION..........................................5
1. Nature of Service:....................................................................................................5
2. Service Profit Chain:................................................................................................6
3. Customer Value – Driven Marketing Strategy:.......................................................6
4. Branding Strategy:...................................................................................................8
III. QUESTIONS ANSWERING.......................................................................10
Question 8.18....................................................................................................................10
Question 8.20....................................................................................................................11
IV. References......................................................................................................13
I. SUMMARY THE SITUATION
The emergence of Airbnb within the context of advancing technological innovation is
an epitome of market disruption of the existing paradigms in the hospitality industry, which
mostly has to do with the provision of hotels and lodging facilities. While traditional hotel
chains offer the same pool of services in the same manner, Airbnb brings the hosts and the
guests looking for accommodation in a specific region to engage directly enhancing their
immersion in the locality. The basic premise of Airbnb is that it is an online e-commerce
marketplace for connecting the seekers and providers of accommodation where the business
possesses no property but only possession of brand as a middle agent.
The very reason, or the belief one could force upon one self, that initiated the spread of
the operation, was the need to find cheap accommodation during a precious major-event
time. So the persons behind the start-up Brian Chesky and Joe Gebbia found an opportunity
to sell airbeds in their apartment in San Francisco and very soon after that innovated for the
first time in b2c e-commerce – customer-to-customer lodging. The idea honed over a short
period bore fruits of this enterprise. Presently, Airbnb has a staggering mission of over 2
million active listings across 191 countries that offer any lodging from a simple single room
or a suite to entire residential properties, castles, boats, and even more. In the case if the host
chooses to vary their pricing strategy, antibiotics and medications for guests who are sick
can find rooms in varied cities at different prices with different facilities thus making each
apartment unique from the other.
A fundamental component of Airbnb’s strategic plan is its strategic opportunity to
cater for cheap accommodation facilities as well as enriching experiences as well. The
patrons can visit the areas and engage within those neighborhoods just like their own
residential areas, enjoying the attractions in a manner that most hotel establishments will
never allow. Travelling has become even more exciting and less congested thanks to this
bond of the guests with the hosts, which is a high end advantage that allows a unique selling
proposition for Airbnb.Airbnb has also prioritized safety and trust through features like
rating and verification systems and guest-host insurance. These measures help address the
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initial concerns about sharing spaces with strangers. The rating system allows both parties to
learn about each other beforehand, while insurance coverage and a safety hotline enhance
security, contributing to the platform’s credibility and appeal.
As the company grew, it even drew the attention of the competitive hotel industry. At
first, its expansion was considered a low-risk strategy that would theoratically lead the
company to smaller towns. However, despite the global pandemic, Airbnb’s influence
rapidly grew and penetrated major cities and even the most improbable tourist zones which
had traditionally belonged to hotels. Over the last years, as its business operations were
valued over 25 billion dollars and growing, Airbnb has outpaced many other already in the
market players such as Hilton Worldwide for example.
Even so, there are still obstacles that the firm has to deal with. First, there are market
restrictions; in some cities where the company operates, short-term rentals have been limited
or even ceased to operate thus creating a ceiling for its growth in a given area. Additionally,
most urban dwellers have come to appreciate the concept of home-sharing which has been
marketed very well by Airbnb; however, there are still some travelers who would rather go
to an impersonal hotel than interact with people they do not know.
As an attempt to reinforce its position in the market, Airbnb went through rebranding
in the recent past changing its logo and adding a tagline “Belong Anywhere”. This was
intended to show the commitment that the rental business had in slowing down on
consumerism and encouraging users to organize themselves around the brand. The company
is still emphasizing its offerings when it describes itself as a service that lets one play the
local tourist in a foreign country. Feeling as an expert, as a local who can bring interesting
things and does not sell, but provides real interesting experience to the clients, Airbnb
continues to transform itself offering wonderful experiences.
To sum up, the Airbnb business has managed to disruption the hospitality market as we
know it, providing a useful resource that has come to address the issues posed by the typical
services of hotel chains. Convincing people of the need for trust and relationship over price
and convenience has become the polished weapon that separates the majority of adventurers
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and budget wanderers for the adventurers of this generation. With its fresh outlook and
aggressive expansion, the cooperative is likely to alter the manner in which tourism is
executed today along with the already existing hotel businesses, even in the face of
implementing restrictions.
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II. THEORIES RELATED TO THE SITUATION
1. Nature of Service:
There are 4 characteristics of services, which are related to the Airbnb case:
Intangibility: “means that services cannot be seen, tasted, felt, heard, or smelled before
they are bought” (Kotler & Armstrong, 2018). Airbnb’s services cannot be touched or tested
before use. Airbnb addresses this characteristic by providing detailed descriptions,
professional images, guest ratings, and verified host status to reduce the risk that consumers
may face. Airbnb makes up for the intangibility of its services by providing
tangible evidence of their excellence and distinctiveness.
Inseparability: “means that services cannot be separated from their providers, whether
the providers are people or machines. If a service employee provides the service, then the
employee becomes a part of the service. And customers don’t just buy and use a service;
they play an active role in its delivery. Customer coproduction makes provider–customer
interaction a special feature of services marketing. Both the provider and the customer affect
the service outcome” (Kotler & Armstrong, 2018). Airbnb connects hosts and guests
directly, emphasizing personal interaction. Hosts play a significant role in creating the guest
experience, ensuring service and product delivery are inseparable.
Variability: “means that the quality of services depends on who provides them as well
as when, where, and how they are provided” (Kotler & Armstrong, 2018). Airbnb addresses
variability in service quality by allowing hosts and guests to review each other, moreover,
creating a system that encourages hosts to maintain high standards.
Perishability: “means that services cannot be stored for later sale or use.
Accommodation is a time-bound service” (Kotler & Armstrong, 2018). If a room or house is
not rented, the opportunity is lost. Airbnb mitigates this by giving hosts flexibility to set
availability and prices.
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2. Service Profit Chain:
“In a service business, the customer and the front-line service employee interact to co-
create the service. Effective interaction, in turn, depends on the skills of front-line service
employees and on the support processes backing these employees. Thus, successful service
companies focus their attention on both their customers and their employees. They
understand the service profit chain, which links service firm profits with employee and
customer satisfaction” (Kotler & Armstrong, 2018). Airbnb's “employees” are its hosts, the
company understands that host happiness and engagement have a significant impact on the
quality of the visitor experience. Airbnb treats hosts as partners and creates a friendly
community, ensuring that they have the tools, resources, and safety measures they need to
feel respected and secure in their positions. This focus to “internal service quality” results in
pleased and productive hosts who are more likely to deliver excellent customer service,
which improves the entire visitor experience. Satisfied consumers are more likely to stay
loyal to Airbnb, suggest the service to others, and make repeat bookings. This cycle of
positive reinforcement is consistent with the Service Profit Chain model, which holds that
high employee satisfaction correlates with superior service delivery, resulting in healthy
profits and growth for the company. Thus, Airbnb effectively employs this approach by
developing an atmosphere that promotes host well-being, resulting in a feedback loop that
benefits both hosts and visitors, propelling the company's continuing success in the
competitive hospitality sector.
3. Customer Value – Driven Marketing Strategy:
Market Segmentation: Market segmentation is the arrangement of the huge market
interest into smaller segments involving geographical, demographic, psychographic, and
behavioral criteria (Kotler & Armstrong, 2018). Geographic approach divides the market
according to the geographical region it occupies starting from countries, cities or districts, in
this way the enterprises can focus on the presentation of those products and services that will
be convenient for inhabitants of this or that region. Dividing the population into age, gender,
income, education, and some other variables that help consumers in purchasing is called as
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demographic segmentation. Psychographic segmentation does the opposite but deeper – the
focus is on the people’s mindset, their social affiliations, and even their way of living.
Finally, behavioral segmentation examines how frequently consumers utilize and are loyal
to a certain product. These strategies enable organizations such as Airbnb to personalize
their marketing to specific market niches, ensuring that they match market demands. Airbnb
has transformed hospitality, challenging huge providers of standardized services. The
company’s marketing approach, grounded in community, authenticity, and personal
connections, appeals to budget-conscious travelers and adventure seekers alike. Airbnb's
segmentation strategy is effective because it’s measurable, accessible, substantial, distinct,
and actionable. Airbnb’s market is clearly divided by budget, location, and type of stay,
catering to diverse groups from budget travelers to high-spending guests, as well as niche
markets like long-term stays for remote workers. By meeting varied traveler needs, Airbnb
competes effectively against traditional hotels and remains a dynamic force in the tourism
industry.
Market Targeting: “Market targeting involves assessing the viability of every target
market segment and identifying one or more segments to cover” (Kotler & Armstrong,
2018). In essence, Airbnb focuses on two groups of individuals: travelers who would rather
have unique experiences than board in a hotel and homeowners who would like to rent their
premises to make some money. This makes it possible for Airbnb to be different from all
others in the hotel business, by meeting these diverse groups’ needs. To tourists, Airbnb
provides localised accommodation options that cater for their curiosity in varying countries.
The same applies to hosts: while the hosts can utilise the platform to earn some cash for their
unused properties, the tools available ensure that the host does not have to worry about
anything as they go about hosting. By doing this, targeting both the guests and the hosts,
Airbnb has developed a complete system which enables it to beat its rivals, thus paving way
for its popularity among those travelers, who tend to be more specific and prefer different
travel experiences.
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Differentiation and Positioning: “After a company has decided which market segments
to enter, it must determine how to differentiate its market offering for each targeted segment
and what positions it wants to occupy in those segments”. “Positioning is arranging for a
product to occupy a clear, distinctive, and desirable place relative to competing products in
the minds of target consumers” (Kotler & Armstrong, 2018). To effectively set itself apart
from competitors, Airbnb has been able to provide a range of sociocutural activities via
accommodation options such as the apartment allowing tenants to have not only hone away
from hone experiences but hone as well. This aspect is what differentiates Airbnb from any
traditional hotel chain, which more often than not, provides a very uniform, robotic
experience. The beauty of AirBnb is that it seeks to give its users unique and local
experiences rather than just purpose built accommodation. This is important because in such
intercultural travelers, the stay at the hotel represents only a small portion of their lives and
they feel a strong need to connect with the people and culture. Communities serviced
through Airbnb emphasize local interaction between hosts and guests and the idea of hosting
which complements the place-oriented focus. By promoting this idea of attachmemt and
cultural engagement, Airbnb creates a space that is inviting for its clients unlike hotels
which many a time are not personal. Such a strategy gives an edge to Airbnb over other
players in the industry, but also helps create a very strong and enduring emotional
connection with the target market, which in this case are the people who love travelling for
the sake of experiencing real things.
4. Branding Strategy:
Brand Equity and Brand Value: “Brand equity is the differential effect that knowing
the brand name has on customer response to the product and its marketing. It’s a measure of
the brand’s ability to capture consumer preference and loyalty. Brand value is the total
financial value of a brand” (Kotler & Armstrong, 2018).
Airbnb’s very high brand equity comes from its providing of value unique experiences
that transcends the ordinary hotel offering. To the company, brand equity as regards to
Airbnb goes beyond the simple aspect of recognition and touches upon how loyal their
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customers are. This is evident in the willingness of the consumers to go for the Airbnb
service unlike other services which offer the same when it is available. The brand equity of
Airbnb, similar to those already mentioned, is built upon the capacity of the brand to
penetrate the massive network effect. Through review driven trust, high service levels
through “Superhost”, and customer satisfaction, Airbnb has created a unique brand with
strategic and economical importance.
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III. QUESTIONS ANSWERING
Question 8.18: How do the four characteristics of services apply to Airbnb? How
does Airbnb deal with each characteristic?
The four characteristics of services: intangibility, variability, inseparability and
perishability are applied to the case of Airbnb:
- Service intangibility: This first characteristic of service is service intangibility. When
it comes to Airbnb, it means that customers are unable to go and preview the apartment they
wish to rent out before arriving at their destination. To solve the issues of clients and
customers reluctant to pay for the unknown and the associated risk of being “catfished”,
Airbnb has come up with a solution whereby all the homes to be listed must have photos
uploaded for everyone to see, that way customers can have an idea about the home as much
as is possible without actually being there. With this, customers are more comfortable and
receive a better idea of what they will receive, giving them more confidence as they pay.
- Variability: This next characteristic applies to Airbnb because Airbnb as a company
has to mitigate and combat a sense of uncertainty and fear that comes with the variability of
the services, especially since as previously discussed, customers cannot visit and see the
property before booking, and all properties are completely different. They pride themselves
on no two rooms being the same. To deal with this variability, Airbnb enacted the standard
rating system that is used for both guests and hosts that include things such as “verification
process, tips for safe and satisfactory bookings, and a 24-hour Trust and Safety hotline”.
This helps minimize any issues or concerns that arise with this variability in their service
structure.
- Inseparability: This characteristic of inseparability is very applicable and essential to
truly what Airbnb is. Airbnb separates itself from the entirety of the hospitality industry,
especially traditional hotels, by using the idea of staying in a random person's home as an
asset. Investors originally thought that they were crazy, because anyone would think that
people would be scared and fearful to stay in a stranger’s home. However, Airbnb made this
idea desirable as it allows for guests to feel like a true part of the destination in which they
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are staying, rather than just receiving the hotel experience. Also, to promote this guest-host
relationship, Airbnb encourages hosts to offer services like walking tours and airport
pickups, to allow the guests to form relationships.
- Perishability: The last characteristic is perishability. Airbb addresses this by allowing
visitors and hosts to engage before the guest hires the place, so that they know what to
expect during their stay before spending money. When customers reserve a stay, they need
to pay a security deposit, and Airbnb charges a 6-12% service fee, meaning the company
profits even if the guest cancels.
Question 8.20: How does Airbnb differentiate its offer, delivery, and image?
Based on mentioned marketing and service theories, Airbnb can be considered not a
hotel in the traditional sense because it gives customers hope for an experience that will be
unique and driven by the local culture itself, as opposed to the uniform and bland hotel
rooms. Hotel rooms are built to be boring and the same for everyone, while Airbnbs make
one feel at home in the city they visit. It is therefore easy to understand why the Airbnb
model is full of such great warmth between the guests and the hosts. The company tries and
achieves this kind of branding through its logo ‘Bélo’ and the tagline “Belong Anywhere”
which does resonate with exploration and growth of individuals and travel.
Differentiation in travel and accommodation services occurs in three specific areas:
offers, service delivery and brand image of the company. For offers, Airbnb changes its
targeted promotions based on time and location as well as host. This incorporates time-
bound deals like weekend getaways or festival promotions, place-dependent focuses on
already or emerging hot tourist spots and rewards aspects aimed at aggressive and unique
hosts. This promotional strategy is enhanced by the element of segmentation as it cuts across
various segments such as demographics and geography so as to provide different offerings.
Therefore, not only does Airbnb know how to segment its target market that goes from
complimentary travelers to luxury ones, it also knows what products to create for its
potential customers.
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When it comes to service delivery, Airbnb enables flexibility and comfort to the
customers, which usually has been absent in the case of conventional hotels. The interaction
between hosts and guests allows for a more immersive experience in which guests can get
local tips for an enjoyable stay. The platform goes ahead to provide safety and safety
measures through customer reviews and self-regulatory practices and regular updates, which
helps to ensure that hosts and guests alike maintain high standards during the booking
process.
Reiterating their strategy is a distinctive image of Indo-Korean cuisine that Airbnb
enhances. The symbol “Bélo” and its phrase ‘Belong Anywhere’ seeks to show this idea of
travelers everywhere, somehow, belonging. Such a notion of connection and community, so
ingrained within Airbnb, is in the stark contrast with the cold and distant rendering of
service inherent in hotels, nurturing off an ever-growing clientele that appreciates the
personal touch and true travel experiences availed by Airbnb. It is due to their ability to
master these elements - personalized offers, contextualized service delivery and an attractive
brand image - that enables Airbnb to stand out in the hospitality sector attracting those who
do not just want a place to sleep but warmth and sense of belonging.
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IV. References
Kotler, P. T., & Armstrong, G. (2018). Principles of marketing (17th global ed.). Pearson.
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